There was a day’s grace as we moved into 2024, but the mortgage market – and lenders in particular – certainly didn’t wait any longer in terms of making some big pricing and product moves. Buy-to-let lenders were no different, with many including Fleet, cutting rates on products and reshaping ranges to reflect a much more competitive pricing environment, fuelled by lower swap rates.
I think it’s also fair to say the market will not stop here, particularly if swaps do continue to either maintain their current levels, or indeed track lower still. As I write, two/three/five/seven and 10-year SONIA swaps are all below where they were a year ago, which we were not able to say during nearly all of 2023.
Buy-to-lenders making moves
So, what might these moves by buy-to-let lenders specifically mean within the sector, which spent a challenging 12-month period seeking to help advisers and their landlord borrowers deal with increased rates and the issues this raised in terms of affordability and securing the right loan amounts?
Well, as we know, there were a plethora of lower rate/higher fee deals launched in order to deal specifically with this issue, and while many of those products remain including our own, we might well see these begin to drop in number if rates continue to fall.
Some buy-to-let lenders have already pulled these products from their ranges, and advisers will be working on the numbers to see if they continue to make sense for borrowers. As mentioned, I believe if rates continue to track lower, there will be less demand for these products.
Secondly is the decision around where rates might be going next and what this means for borrowers when the better current rates are at longer terms – mostly five-year fixes.
This may mean that trackers become more relevant over 2024, whereby landlord borrowers opt to take a higher-priced tracker product now, but without an early repayment charge (ERC), allowing them to ‘Track to Fix’ if/when they feel fixed rates might have bottomed out.
It would not be surprising to see borrowers hedging their bets, and from an adviser perspective, this could be the right short-term recommendation, allowing you to keep a close eye on market moves and then move that client again at some point in the future.
Clearly, there is an accepted risk for the client here, but there is a growing sense that, for example, bank base rate will begin to be cut this year, and if lenders continue to react as they have been, there may be a more suitable, cheaper longer-term fixed-rate option available later in the year, rather than now.
New buy-to-let lenders
Finally, and this remains a constant consideration for both advisers and their landlord borrower clients, rumours continue to swirl about new buy-to-let lenders and when/if they launch, advisers will need to judge them on their service, support and understanding of this sector. Plus, advisers also need to be aware that cheapest rate very rarely means the best service, and this is certainly the message I’m hearing from advisers, even at this very early stage of the year.
Having the cheapest rate right now will always draw attention, but this must be managed in a service sense as well, particularly when time is of the essence, and both advisers/landlords need swiftness and certainty.
Weigh up exactly what you are recommending and with which lender, because if the service and support isn’t there, or they have not been able to cope with the business their price-cutting has generated, then you could end up at the back of a queue and any perceived monthly mortgage payment saving won’t be worth the time you spent recommending it, or the time spent explaining to the client why the case hasn’t moved forward.
